Monthly market commentary - March 2015

Summary of March

After February, characterized by small companies bull market, March was the month with a minimum advantage of mediocres from the mWIG40. These companies gained less than the previous month, only 2.1%. At the same time, companies from the sWIG80 performed worse with 1.4% growth and companies from the WIG20 noted slightly more than one percent growth. The important fact is that the companies from the banking sector have increased on a monthly basis. These companies were an albatross around index’s neck previous month because of significant consequences of granting loans in Swiss francs. Good sentiment was sustained at the beginning of the month due to the expected interest rates cut decision. The NBP inflation projection with the prospect of prolonged deflation was the main argument for this move. The reading was higher than preliminary GDP growth, that was important in context of the decision. As long as these arguments were quite predictable, the scale of reductions was surprising, excessing the expected 25bp twice. According to Marek Belka, decision was the end of reductions’ cycle. Among the interesting events in Poland, attention should be paid to the important March acquisition. Acquisition of controlling TVN’s shares was made by Scripps Networks Interactive, owner of brands such as HGTV, Travel Channel and Food Network. The market price did not react positively to the information and the company ended March with a significant decrease. Companies with surprisingly positive results for 2014 were performing much better. We should mention for example Cyfrowy Polsat, Amica Wronki, ZUE, Benefit Systems, Alumetal and Police.

Exchanges of developed European markets stopped rising rapidly last week. The French CAC40 gained only 1.7%, that is comparable to the largest index in Warsaw. The DAX excelled again with a 5-percent surge. Positive information about the implementation of quantitative easing programme was the argument for last increases. According to Mario Draghi, buying bonds is progressing without mishaps and markets have sufficient liquidity. On the other hand, Greek debt issue and concerns about repayment of the first tranche of the loan are perceived negatively. The S&P500 ended month with a fall of 1.7%. Thus, the index bounced twice from the historical peak at 2115 points. More dovish than expected pronunciation of FED statement did not help. Information about removing the word “patience” in increasing interest rates caused the increase only in the short term. Increased risk aversion associated with the stock market was connected with Saudi Arabia and the Council of the Persian Gulf countries attack on Yemen. One of the best performing global indexes was Argentinean Merval. The bull market lasting from December previous year is gaining momentum, and only in March, the main stock market index in Buenos Aires increased by 12.9%.

Technical analysis

Graph 1. WIG20 daily. Source: Stooq

Good streak of the broad market index lasting from the end of January may meet serious resistance soon. The resistance is about the level of 55 687 points, which constitute the upper limit of the trend lasting more than one and half a year. The prospect of the fight with the most important resistance appeared when the index successfully break the resistance around 54 075 points few days ago. Similar attempt was not successful the second half of March, which may indicate the need of a larger correction. Thus, April and May are the months in which the index will compete for breaking up from the horizontal trend.

Graph 2. DAX daily. Source: Stooq

Another month and another historical highs – it can be a summary of the German DAX results. The index gained 5% in March and set a new maximum at 12 219 points in the mid-month. Since then, the strength of the upward trend slowed down, but we still did not see a break from short-term upward trend. Just the opposite, the index has shown a willingness to re-growth at the end of the month. In the positive scenario, the upper limit of the trend is located few hundred points higher. One of the few signals for decline showed MACD indicator only.

Authors: MM Prime TFI S.A. Investment Management Team

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